Black-owned private equity firm Red Arts Capital, which focuses on North American-based transportation and logistics, is currently raising its first institutional fund seeking up to $225 million.
The company, started in 2015 by two young men who met while having coffee at a Starbucks, had been raising capital on a deal-by-deal basis, Forbes reported. Nicolas Antoine and Chad Strader attracted the support of power players in the finance space, including John W. Rogers Jr., founder of Ariel Investments, the oldest Black-owned mutual fund firm in the country. Antoine had previously worked as chief of staff to Rogers.
“We’re kind of hardwired to be contrarians in terms of our thinking, and there’s a lot of focus right now on technology and health care,” Red Arts Capital partner Antoine told Business Insider. “We were looking at businesses and thinking about industries where there was an under-appreciation for the value they were providing to the economy and to society.”
On that fateful day in Starbucks, Antoine and Strader bonded over the book “Why Should White Guys Have All the Fun” by Black business trailblazer Reginald Lewis. Lewis was one of the richest Black men in the U.S. in the 1980s, and the first Black American to own a billion-dollar company, TLC Beatrice International Holdings.
Now Antoine and Strader are tying to blaze a few trails of their own in the finance sector. There are currently 84 private equity investment firms owned by Black Americans, according to a report published by Fairview Capital.
And while Antoine and Strader were new to entrepreneurship, they both had professional expertise that would allow position Red Arts Capital to enter a sector with vast opportunities and limited competition. Antoine’s knowledge of investment firms coupled with Strader’s background in supply chain cemented their focus on supply chain investments in the trucking and logistics industry.
The partners’ research and valuation of the industry has paid off. Red Arts actively invests in third-party logistics and less-than-truckload spaces. Both of these have sectors have reaped the benefits of the pandemic and the greater need for e-commerce.
“We always had an idea about e-commerce and LTL, but I would say the last two years have accelerated that tremendously,” Strader told Business Insider. “LTL freight volumes have increased. The size of the average shipment, the average weight, all of those dimensions have increased. And that’s a big part of the strategy.”
In December 2021, for instance, Red Arts sold Midwest Motor Express to Knight Swift Transportation for $150 million. This sale provided an almost eight-fold return for its investors. The exit is just one of Red Arts accomplishments as the firm as made five acquisitions since its launching. According to Antoine supply chain buyouts have been on the uptick as transportation investors are not as inclined to purchase a company for its assets.
“The industry has become a lot more efficient, a lot more competitive,” Antoine told Business Insider. “That means that financial engineering is less of a tool to create value for investors. It requires more expertise, more planning, and thoughtfulness.”